In a furious reaction to the report, a Yahoo spokeswoman said: "We were not aware of, nor would we condone, this reported activity.

"This report, if true, represents a whole new level of violation of our users' privacy that is completely unacceptable and we strongly call on the world's governments to reform surveillance law consistent with the principles we outlined in December.

"We are committed to preserving our users' trust and security and continue our efforts to expand encryption across all of our services."GCHQ declined to comment on the claims.

Files dated between 2008 and 2010 allegedly show a monitoring programme, known as "Optic Nerve", stored still images from Yahoo webcam chats and saved them to agency databases with the help of its US counterpart the National Security Agency.

GCHQ has consistently said its activities are necessary and "carried out in accordance with a strict legal and policy framework”.